Pembina to boost Jordan Cove LNG project after Veresen acquisition

Pembina Pipeline Corporation has agreed to acquire Veresen in a transaction valued at C$9.7 billion ($7.10 billion) creating one of the largest energy infrastructure companies in Canada.

Pembina said Veresen shareholders could opt to get either 0.4287 of a Pembina share or C$18.65 in cash.

The deal was unanimously approved by the boards of both companies and is expected to close late in the third quarter or early in the fourth quarter of this year.

The deal gives Pembina a 100 percent ownership of the proposed Jordan Cove liquefied natural gas (LNG) project in Oregon, which is estimated to be worth about $6 billion.

The LNG export project could benefit from the transaction due to stronger balance sheet of the combined company, as Veresen was previously tipped not to be able to fund the project alone.

“We are excited about Jordan Cove… We think it can happen. We think it makes sense to have some partners in there,” Pembina’s Chief Executive Michael Dilger said on a conference call.

Veresen initially planned to develop a 6 mtpa LNG export facility at Coos Bay, Oregon, however, the project was denied by the United States Federal Energy Regulatory Commission. Following alterations to the project design, Veresen’s units filed a new request for the pre-filing review process, which was approved by FERC in February.

Dilger added that “the combined cash flow of the company after the dividend could be as high as $900 million… There are significant milestones for Jordan cove that have to be met this year, but it can bring that project forward.”

Speaking during the conference call, Veresen president and CEO Don Althoff said the project was “a little too big for Veresen.”

However, the balance sheet of the combined company “is so much bigger and so much stronger, it really is very supportive of big projects like Jordan Cove,” he said.

Following the redesign, the project is planned to have a production capacity of 7.8 million tons of LNG per year, and includes the construction and operation of a 233-mile-long 36-inch-diameter pipeline.

Veresen has two preliminary agreements reached with Japan’s Jera and Itochu, both booking at least 1.5 mtpa of LNG.